THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

CANDY CROWLEY, CNN ANCHOR: If words were action, we'd be done with this. But they aren't. And we're not.

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): Today, upbeat after a Thursday meeting with the president --

UNIDENTIFIED MALE: We had a very useful meeting. It was clarifying, I think, for both sides.

CROWLEY: Friday morning, House Republicans offered a new budget plan. Friday afternoon, he says no. Saturday, the arena shifts amid fears from House Republicans that Senate Republicans will get rolled by the president.

UNIDENTIFIED MALE: He's hoping to cut a deal with the Senate which would, I think, be a terrible deal to undermine the House.

CROWLEY: Will senate Republicans sell out their House counterparts? Our exclusive with Senator Rand Paul. Then --

UNIDENTIFIED FEMALE: I did have the opportunity to present the plan that many of us have been working on.

Democrats have rejected her compromised plan, but Maine Republican, Susan Collins, labors on. She joins us along with her Senate colleague, Minnesota Democrat, Amy Klobuchar.

Plus, our political panel on the Republican brand, the president's legacy and facing government. How the shutdown and the debt ceiling debates may be rocking all three?

This is STATE OF THE UNION.

(END VIDEOTAPE)

CROWLEY (on-camera): Good morning from Washington. I'm Candy Crowley. We are 13 days into this partial government shutdown and no signs of a deal. Democrats met with the president last night and say they're united. They will not negotiate until Congress ends the shutdown and lifts the debt ceiling.

Senior White House correspondent, Jim Acosta, is here. Jim, take us inside last night's meeting. What was the purpose?

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: Well, the purpose was really, Candy, to get Democrats on the same page, and they have been very united through all this. You've seen some of the fracturing inside the Republican Party. That has not really been the case with Democrats.

And the sense that we're getting today, Candy, as you know, Senate majority leader, Harry Reid, and top Senate Democratic leaders were here at the White House, but that followed a very important meeting that occurred yesterday between Senate majority leader, Harry Reid and Senate minority leader, Mitch McConnell. That is essentially the first time these two leaders have met over these negotiations to reopen the government and to raise the nation's debt ceiling.

There is another meeting expected later today, although, one is not scheduled at this point. But interesting to note, Candy, one new development in all of this, we're hearing from Senate Republican sources that Senate majority leader, Harry Reid, is now insisting on changes to the sequester as part of a larger deal to reopen the government and raise the nation's debt ceiling.

Of course, Republicans are balking at that at this point, and that is not a good sign as to where the negotiations are headed. Although, as you know, Candy, perhaps, Senate Majority Leader Reid is just taking a harder position at this point. He's driving a hard bargain.

CROWLEY: He is, sequester being those forced budget cuts. Has the White House now farmed this out to the Democratic leader in the Senate? Where do they go from here?

ACOSTA: Well, I think where it goes from here, Candy, of course the global financial markets are going to start weighing in on what's happening here in Washington later today. The stock market is open on Monday because of the -- in spite of the Columbus Day holiday, I should say. And so, once the markets start reacting to this gridlock in Washington, that may force the hand of both Democrats and Republicans.

But, of course, Candy, whatever comes out of the Senate if something comes out of the Senate, the key question is here, can House speaker, John Boehner, get it through the house? That caucus of conservative Republicans, that is where things really hinge. And, at this point, we're waiting to see what the White House and President Obama have to say about these latest talks, but we do expect them to continue later today, Candy.

CROWLEY: Jim Acosta at the White House, thank you.

House Republicans dropped out of negotiations with the President Saturday leaving their members in the Senate to try and cut a deal that will re-open the government and resolve the debt ceiling before the deadline next week.

Joining me now is Republican senator, Rand Paul, who met with the president on Friday along with the group of Republicans. Senator, thank you for being here. Do you have a bottom line below which you will not go in accepting something that would end this standoff?

PAUL: You know, I think compromise is in the eyes of the beholder. I'm willing to compromise. We've offered 13 compromises this week to open the government. The Democrats rejected each one of them. To me, there's a big picture problem. We have a $17 trillion debt. We're borrowing more than a million dollars every minute.

So, we do have to address that. I think the one thing I cannot accept and the one thing that I think is really not even a compromise at all is the Democrats want to exceed the sequester caps, these things that we put into law to restrain spending already. And it's funny, they're all about Obamacare being the law of the land, but so is the sequester.

The sequester is the law of the land, and if we exceed that, it's a real big step in the wrong direction.

CROWLEY: And just for our viewers, the sequester are forced budget cuts that unless there is some agreement on Capitol Hill about spending, they go into place. And the next round is expected to go into place in January. So, now --

PAUL: Yes. And to clarify --

CROWLEY: Go ahead.

PAUL: And to clarify what the sequester cuts are, they're a cut in the rate of increase of spending, because over ten years, even with the sequester, government will grow. It goes down for a year or two, but over 10 years, it grows.

If we get rid of that, it's a terrible step in the wrong direction, but it's also a different position because the Democrats were saying, oh, we want a clean CR. We want a spending bill with no writers. Now, they want a spending bill that increases spending and dramatically will increase the debt. It's a non-starter.

CROWLEY: And is it a non-starter, do you think, with the rest of the Senate Republicans?

PAUL: I can't imagine you're going to get Senate Republicans to vote for something that exceeds the sequester caps. I think it's a huge mistake for the country. The number one problem we face is our debt. We have to do something about our debt.

CROWLEY: Let me read you something that Eric Cantor, the majority leader in the House, had to say when the House sort of gave up negotiations with the president. He said "I know the president is trying to see which Republican senator he can pick off in the Senate. I hope that the Senate Republicans stand strong so we can speak with one voice."

Do you think at the end of the day, Senate Republicans are more eager for some sort of resolution than House Republicans are and will, indeed, sort of give up on what some of the things the House Republicans have been pushing for?

PAUL: You know, I'm not positive. I think every member of our Republican caucus is concerned about the debt. We're concerned about giving him a blank check to borrow more, and I would say that goes through every member of the Republican caucus has a real concern for what the debt is doing to our country,

Now, we're also concerned about the government being closed. None of us likes the government being close. I didn't want to be here in the beginning. And I've been advocating more talk on a weekly basis when we're not -- from deadline to deadline. I've been advocating a bipartisan lunch for over a year and a half now on a regular basis where we talk about these problems. And so far, we haven't had enough discussion. I think that's what's led to this impasse.

CROWLEY: Senator, let me play you a couple of quick bites from a variety, some of them are your Republican colleagues, one of them, an international financier talking about what would happen if next Thursday, I believe, is the day, if next Thursday, the Congress has failed to lift the debt ceiling. Take a listen.

(BEGIN VIDEO CLIP)

TIM PAWLENTY, (R) FORMER MINNESOTA GOVERNOR: We have a real deadline with potentially, you know, cataclysmic consequences.

CHRISTINE LAGARDE, IMF MANAGING DIRECTOR: To raise the debt ceiling would cause serious damage to the U.S. economy but also to the global economy.

SEN. JOHN MCCAIN, (R) ARIZONA: I know some people on Wall Street that are telling me that the markets would react in a very, very negative fashion.

(END VIDEO CLIP)

CROWLEY: Senator Paul, I know you said that you don't think the debt ceiling increases is that big of a deal, but the more you listen to people, the more you read to economists, read what economists have to say, do you think it's worth the risk not to raise the debt ceiling?

PAUL: I think it's not a good idea to go through the debt ceiling deadline. I think we should go ahead and have an agreement in advance. That being said, though, I think it's also irresponsible for the president who when he was a senator actually voted not to raise the debt ceiling. It's irresponsible for him to scare people. He should be the opposite.

The leader of the country should be soothing the markets and saying we will always pay the interest on our debt. And we do have plenty of revenue. We bring in $250 billion a month and we have $20 billion in interest payment. There's absolutely no reason ever to default. And a good leader will be saying we will never default.

CROWLEY: Would a good senator be saying we won't never default? PAUL: Absolutely. And I'm trying to be that. We should never default. We should never miss a payment, but people have to realize that not raising the debt ceiling means you have to balance your budget. It doesn't mean you default. And people are conflating these two and they're not the same thing.

CROWLEY: So, your best calculation, do you think there are enough Republicans in the Senate to join with Democrats to pass an increase in the debt ceiling? What if it came down to the wire and the only thing available was a clean debt ceiling increase, nothing on it, just increase the debt ceiling?

PAUL: You know, I think at this point, you know, we had a vote on Saturday, yesterday, and it was to just raise it without any restrictions. And we all voted solidly against raising it without limit and without restrictions. That's what the Democrats offered us yesterday. No limit over the next year, year and a half. We raise it as high as it goes. No limits. The American people don't want that.

The vast majority of people are afraid of what this huge growth in our deficit is going to do to us. And so, no, I think we have to restrain. And there are two problems. And they're both problems. It is a problem for the marketplace to see us go through a deadline. But in 2011, when we were downgraded, we were downgraded because of the burden of how big our debt was, not because of getting close to a deadline.

The S&P 500 said we did not do enough to cut spending and not enough to act fiscally responsible. That's why we were downgraded. It can happen again if we don't wake up and do something to manage this debt.

CROWLEY: I want to play you a little bit of a conversation that you had with Senator Mitch McConnell, the Republican leader, on the Senate side that was caught by cameras and then ask you a question on the other side.

PAUL: Candy, that was private. You wouldn't play a private conversation on TV would you?

CROWLEY: No, but I sure wouldn't talk when I had a mic on.

(LAUGHTER)

CROWLEY: Let me play this for you. Hang on.

(BEGIN VIDEO CLIP)

PAUL: I think if we keep saying we wanted to defund it, we fought for that. But now, we're willing to compromise on this, I think we're going to -- I think -- I know we don't want to be here. But we're going to win this.

(END VIDEO CLIP)

CROWLEY: You still think you're going to win this? And what does winning this look like?

PAUL: Well, you know the interesting thing about that conversation is I was on CNN about three minutes before that and I said exactly the same thing on television. Not exactly in the same words, but pretty close. I've been saying all along we don't want to be here. We don't want to be in a shutdown. I was against shutting down, and it is a failure of conversation to be in a shutdown.

And what I mean by winning this is not that I think it's a political battle, but that I think it is untenable for the president to say he won't negotiate. And he still repeated that when we were in the White House the other day, he is talking to us which I think is negotiation, but he's also saying I will not pay for raising of a debt ceiling if American people are just -- I have to get this without any conditions which is sort of him saying unconditional surrender which is not negotiation.

So, really, in 2011, we added the sequester. That was a good thing. We need to add more controls and restraint to government spending and this is precisely the time to do it. He's unlikely to negotiate when he doesn't have a deadline.

CROWLEY: I want to show our viewers a recent NBC News/"Wall Street Journal" poll which asked people if they had a positive opinion of the Democratic Party. Thirty-nine percent said yes, Republican Party, 24 percent, Tea Party, 21 percent. lowest favorables for the Tea Party and the Republican Party ever in NBC/"Wall Street Journal" polling.

Do you think as many have now started talking about -- I grant you a lot of them are democrats, that there has been some irreparable harm done to the Republican Party? People talking about how this is the beginning of the end of the Republican Party as we know it.

PAUL: I think our demise is a little bit overstated. I would say that both parties are going to catch a lot of blame on this. This is not good --

CROWLEY: Do you agree that Republicans are taking a lot?

PAUL: Well, I think both are. And I think democrats who think this is a parlor game, who think this is fun -- here's what the Democrats think. They think we'll send a bunch of government workers out there to close off the roadside viewing of Mt. Rushmore because that will be funny, you know? So, I think it isn't funny.

And I think that Democrats and Republicans are going to catch blame. So, I don't want to be here. I don't see this as winning or losing. This is a lose-lose situation. We need to open up government, and it does require conversation. But the president is the one saying he won't negotiate.

And now, it's Senate Democrats saying, we don't -- we used to want to clean CR, but we think you're squirming. So, now, we want to raise spending and break the budget caps. I think we're seeing that the Senate Democrats are getting greedy about this whole thing. CROWLEY: Do you see yourself at any point in the future being anything other than politically a member of the Republican Party?

PAUL: You mean -- you're implying a third party or some other party?

CROWLEY: Or, if you want to become a Democrat. There are lots of parties out there. Just wonder if you see yourself being anything other than a Republican?

PAUL: No. I've always been a Republican. And I'm one of those people who actually is a real lover of the history of the Republican Party from the days of abolition to the days of civil rights. Republican Party has a really rich history. In our state, I'm really proud of the fact that the ones who overturn Jim Crow in Kentucky were Republicans fighting against an entirely unified Democrat Party. So, I am proud to be Republican. I can't imagine being anything else.

CROWLEY: Last question, you can answer no to this if you want. A lot of people have referred to Senator Ted Cruz as the de facto head of the Republican Party. Do you agree?

PAUL: I think that he's done a good job drawing attention to Obamacare. And, that Obamacare is something that is going to be damaging to people. And, for that, I think he's done a great service in bringing attention to I think something that's really going to be bad for a lot of Americans.

CROWLEY: But you don't necessarily see him as the de facto head of the Republican Party?

PAUL: Well, you got 46 of us. We all have a little bit of ego. So, I think most of us kind of think we're one of the leaders.

(LAUGHTER)

PAUL: You know, we have an official leader. We have official leadership. But I don't think any of us are ready to say oh, my fellow senator, he's my leader and I follow him -- there is no one leader other than our official leadership that we have.

CROWLEY: That's why we love the senate. Senator Rand Paul, thanks so much for joining us.

PAUL: Thank you.

CROWLEY: Ahead, compromise falls short.

(BEGIN VIDEO CLIP)

SEN. HARRY REID, (D) MAJORITY LEADER: Sen. Collins is one of my favorite senators, Democrat or Republican (ph). I appreciate her efforts as always to find a consensus. But the plan that she suggested and I've seen in writing is not going to go anyplace at this stage.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

CROWLEY: It might just be the week of the woman. Sixteen-year- old Malala met with the president to promote her campaign for global education. She survived a point-blank shooting by the Taliban on her way home from school last year.

President Obama nominated Janet Yellen to be the first female head of the Federal Reserve and Christian Lagarde, the first female head of the IMF, warned the U.S. to get their fiscal house in order before everyone suffers.

Now, Senator Susan Collins and Amy Klobuchar, here to tell us how they plan to save us from all this madness in Washington.

(COMMERCIAL BREAK)

CROWLEY: Joining me now, Sen. Susan Collins, the senior senator and Republican from Main and Sen. Amy Klobuchar, Democrat from Minnesota. Thank you both for joining us.

Let me first ask you the question about mood, temperament. It seemed awfully tense to be on Capitol Hill yesterday and days before then. And I want to add something to this and this is the latest "Wall Street Journal"/NBC News poll. And the question was, would you vote to defeat and replace every member of Congress including your representative if you could? Sixty percent said, yes, I would. There's a lot of pressure and a lot of tension.

COLLINS: There is. And there's a lot of justifiable anger at Congress and at the president for failing to solve these problems. But I do want to say that despite what people may read, there are a lot of constructive discussions going on behind the scenes. In my office yesterday, there were two different meetings with 12 senators, six Democrats including Amy and six Republicans to try to work away out of this impasse.

CROWLEY: And then we look up on TV and Senator Reid is saying, no, the Collins plan is -- yes, there's nothing in it.

COLLINS: I was very surprised when Senator Reid said that. I don't know why he said it. I don't think it was very constructive. But the fact is we have a responsibility to govern. And we're continuing to talk. And I'm still hopeful that at least we sparked a dialogue that did not exist before we put out a plan.

And, I think that I've made a real contribution that way and that elements of the plan that Sen. Murkowski and Sen. Ayotte and I have put forth will end up in the final compromise.

CROWLEY: Sen. Klobuchar, why did Senator Reid just reject the Collins plus which you have been working on or talking about in her office? Why did he just reject it out of hand?

KLOBUCHAR: Well, I see this plan as a positive framework going forward. And we need that right now. I think you see that back that Senator Reid and Sen. McConnell are now talking and we gotten to a stage where some of the demands that we've heard from House Republicans to put ideological things on the budget and shut the government down if they didn't defund Obamacare, if they didn't get something on birth control. That's behind us know. And, I think the plan and work that we're doing is positive. I think what Senator Reid meant is that he wasn't going to accept every little detail of it. But I think he knows that there are some positive things in that plan that are very good. For instance, we are talking about opening the government again and doing it in a smart timeframe.

We're talking about not having a default on our debt and being actually able to pay our bills again. We're talking about doing something in the long term on the budget, something this country has cried out for, a balanced approach is what I'd like to see with this some spending cuts but also revenue and doing some smart things

I think that's what we need to do as a country, and I see this with a lot of women leading the way. Positive. And I think the fact that these guys are now negotiating is positive for the country.

CROWLEY: And, yet, we're now hearing that Democrats want to break the force the budget cuts in the absence of any kind of budget deal.

COLLINS: Well, that's problematic, but what I think we could do and the reason that I've included a provision that requires a budget conference, a long overdue budget conference, is there could be a substitution of some of the mandatory spending cuts such as the farm bill which would save $23 billion over ten years for some of the cuts in defense and biomedical research that are very troubling to me personally.

CROWLEY: Have you spoken, either one of you, spoken to Senator Reid since he rejected this compromise proposal?

KLOBUCHAR: Well, I have talked to a number of people in our leadership. And I think you'll see today as negotiations continue, elements of this proposal which I think is really important and I wanted to add what Susan said here. When we have a situation, when we have a farm bill that had strong bipartisan support in the Senate that brings the debt down, we have a number of bills, immigration bills brings the debt down by $160 billion in ten years.

There are some important work that we need to do in the Senate. We need to open up the government, make sure that we're paying our bills and then we can go on to do this work.

CROWLEY: One of the other things that really interested me when I listen to Senator Reid yesterday was his saying, well, I hope that America and around the globe, people are reassured that I sat down with Senator McConnell, the Republican leader, today, because we haven't sat down on this before.

We are 13 days into a government shutdown. We are four or five days away from busting through the debt ceiling. And the two main leaders in the United States Senate have not sat down to discuss this yet. How can the American people see that as anything other than a huge failure of leadership? COLLINS: Well, certainly they're talking now and they are the leaders and that is positive. But I think also that the president should have brought the leaders to the White House far earlier than he did. And that's why many of us have tried to step into the breach and put together a plan and offer it to the leaders as a starting point, because real harm is being done.

As this shutdown goes on, the consequences go far beyond the unfortunate furlough of thousands of federal workers. It affects the private sector. It affects our economy. It affects America's place in the world.

CROWLEY: And yet, Sen. Klobuchar, these are two grown men in Senate. They don't need the president to force them to meet. And I just think from the outside looking in, people are going, wait, in the Senate, they haven't even talked about this.

KLOBUCHAR: Well, I think first of all, many people have been talking about this in the Senate. And when you look at the history of the Senate the last few years despite their disagreements, the Senate has been a place where we've gotten things done. I mentioned the farm bill and the immigration bill. It was the Senate that averted the fiscal cliff at the end of last year and then it went over to the house.

It was a Senate that passed the transportation bill that had so much support across this country. So, I actually think no matter when they met or what they're talking, the fact that it's in the Senate right now where there is a group of bipartisan work that has been going on, people that have been work together for so long, I think that's a positive.

And I just like to echo what Susan has said here. We have situations now where plane manufacturer in Duluth, Minnesota can't get their inventory out of a warehouse to be able to try to sell it overseas where there are new exports all the time because the transportation department is shut down and they can't get approvals.

We have fishermen off Alaska that are going to lose their market on crab to Russia. It's an unbelievable thing. We have to get this government open again.

CROWLEY: And I want to ask you quickly about that, because congressman Mark Sanford said -- wait a second, the House already passed a bill that will pay back pay to these furloughed workers. The president put out a press release and said he'd sign it. I can't imagine the Democratic-controlled Senate saying no to that.

And he decided to just bring back his furloughed workers saying they're getting paid. There's no sense them sitting at home, bring them back in. Why not just do that?

COLLINS: We should, and that's what I did in my office after that bill passed the House. I had furloughed most of my staff, but if they're going to be paid, they should be at work. CROWLEY: Transportation people should be at work. I mean, if they're going to get paid --

(CROSSTALK)

KLOBUCHAR: I think the constitutional interpretation of what it means when there is a shutdown and the point is is that right now we have a shutdown going on. And we need to end it. We need to put people back to work and we need to also pay our bills.

CROWLEY: Did you bring your staff back?

KLOBUCHAR: I have about two-thirds of my staff that's out right now and shut down. I think they're going to be back, because I think we're going to get this done.

(CROSSTALK)

CROWLEY: Do you think that this is going to be resolved before we hit the magic date, apparently, of October 17th when we crash up against the debt ceiling? Is it going to be done by then?

KLOBUCHAR: I do think it's going to be done. I think it's going to be done in part because of the kind of work that's getting done where some people said we have to work for the people of America. We're not just going to play these games. We're not going to just speak in metaphors. We're actually going to put a framework out and move forward and that's what we're doing in the Senate.

COLLINS: I agree. This is about our responsibility to govern. And, it's taken far too long. We never should be in this situation. But I do believe we're going to see a resolution this week.

CROWLEY: You two may have single-handedly calmed the markets tomorrow morning when they open.

KLOBUCHAR: I hope so.

CROWLEY: Fingers crossed and all of that, because you're right. I mean, the people that aren't going to get back pay are all those workers that are affected by the government shutdown but don't work to the federal --

KLOBUCHAR: Exactly. The little stores that are right next to the parks. All of the people that are just trying to get by and make it in this country and we're not doing the jobs for them. And that's why we got to get this done.

COLLINS: And that's not right.

CROWLEY: So are there on going meetings about Collins plus? And whose -- how many people have you gathered in your office?

COLLINS: Well, we had 12 people meet yesterday, but just last night, I had two more Democrats and a Republican contact me to offer suggestions and say that they wanted to be part of our group. So, I think that's very positive. We're going to keep working, offering our suggestions to the leadership on both sides of the aisle in an attempt to be constructive and bring this impasse to an end. Surely we owe that to the American people.

CROWLEY: There might be some Republicans who would like to see the junior senator from Texas disappear. Our political panel on the Republican brand next.

(COMMERCIAL BREAK)

CROWLEY: Is there a fate worse than death? Chris Christie says if he were in the senate right now he won't kill himself. The government is partially shutdown, the credit card is nearly maxed out and negotiations have hit a brick wall. What does a congress do? Many of them headed home for the long holiday weekend with all time low approval numbers that can't be helpful. Get ready for Newt Gingrich, Anita Dunn and Brian Schweitzer when we return.

(COMMERCIAL BREAK)

CROWLEY: Take a look at the words people are using to describe the grand old party. Surrender, damage. Last days of the GOP. Joining me now former Montana governor Brian Schweitzer, Anita Dunn, she's the former White House Communications director for President Obama, and CNN CROSSFIRE host, Newt Gingrich, who knows a thing or two about shutdowns. Thank you all for joining me. So we are beginning to see these -- there's something fundamental going on in the electorate. This has brought the Republican Party down to its worse numbers in history in terms of approval and it's just the beginning of the end.

NEWT GINGRICH, CNN CROSSFIRE HOST: This is childish. It's silly. You are about to have Chris Christie win an election in New Jersey by probably more than 20 percent. It is 390 days until the next election. And to suggest -- you go back and look at Thatcher in 1983. You go back and look at Reagan in '82 and '83. This is in the middle of a bloody fight. This is a serious principled fight. Nobody in this city wants to grant the House Republicans any dignity. But the fact is they are fighting over very profound principles. And when it's over and when the dust settles, the country is going to assess. And they're going to going to say that Obamacare is a disaster.

CROWLEY: In fact, Anita, I think when we get into next year, here's where the balance of the election lies. You get a whole bunch of stories about how wonderfully the president's affordable care act is working, that this person now has health insurance for the first time. Or even a whole bunch of people going I'm now paying six times more for my insurance than I ever did before and therein lies the election. This will be a distant memory by the time we roll around to September.

ANITA DUNN, FORMER WHITE HOUSE COMMUNICATIONS DIRECTOR: Candy, thank you for having me on this morning. I fundamentally disagree with that. I think that the affordable care act Obamacare will be part of what people are looking at next year. But they're going to be looking at a broader issue which is the economy. Are we growing jobs? And the leadership involved with what we need to do to move to the future. I think that the Republicans right now are -- I agree with speaker Gingrich, obviously. The party is not dead. But it is doing itself some extraordinary damage. In a year that started off for them and moving forward on immigration reform trying to broaden their tent. And by the end of this year if they say, OK what did we accomplish, they have some very negative attitudes. You have to believe there are people sitting around right now saying, bring back Mitt Romney and the 47 percent take because that is better than what's going on now. And the reality is that they're hardening some very negative impression that exists. It's going to be hard to turn that around.

CROWLEY: You know, governor, I remember distinctly just coming out and covering you when you were governor. Because you were a new kind of Democrat. You were a DLC Democrat. And the DLC was a group of moderate Democrats, Bill Clinton being probably the most successful one, who got together after the 60s when the Democratic Party was pulled many felt way to the left and could not win national elections. Do you think that sort of -- should there be a formation of that sort of group? Say Republicans disagree (ph) that Republicans were --

BRIAN SCHWEITZER (D), FORMER MONTANA GOVERNOR: I think it's going to find the middle ground. You just had a couple people on that are looking for that middle ground. And they're found in the House. They're found in the Senate. I think there's 20 some members of House right now who have said that, gee, we would vote for C.R., a clean C.R., no strings attached. But you know, not a single one of them was invited to go with Boehner to the White House. This actually right now, this big fight everybody in America needs to understand this, this is a fight for who is going to be next speaker of the house. And we've got about a half or maybe more of the Republicans in the House who are saying, we don't want Boehner anymore. And so it spilled over, and now we have a government shutdown but we're still paying our employees. We are questioning whether we're going to pay our debts. This is a big mistake for the Republican Party. Look, the Democrats have made mistakes before. And if the Republicans would have just sat back and said, see, we told you Obamacare wasn't going to work, they may have won this battle.

CROWLEY: Newt, do you agree that Speaker Boehner took these things to the point that they are because he wanted to stay speaker? GINGRICH: I think first of all, every speaker does what they have to do to be speaker. Otherwise, they're not speakers. So it's kind of a silly formula. But notice what's going on. Boehner goes down and says, I'll give you six weeks of a clean debt ceiling. The president probably says, no. Harry Reid is now trying to redouble the bet and is saying not only will I not accept it from debt ceiling, I want you to actually roll back the sequester. Now at some point you have to understand this is a profound fight over the size of federal government, the size of the federal deficit and whether or not Washington is going to run the whole country competently (ph) as it has with the health.gov. In a country that has Amazon and Google, the U.S. government they can't figure out how to put up a site you can you go to? This is a sign of how fundamentally incompetent the bureaucracy is.

CROWLEY: Some of the states have done better actually than the federal Web site has done. I want to play you quickly in reference to the GOP brand which we do know in polls has at least taken a current hit and something I asked Senator Ted Cruz last week.

(BEGIN VIDEO CLIP)

CROWLEY: Do you think you hurt the Republican party brand?

CRUZ: Not remotely.

(END VIDEO CLIP)

CROWLEY: Is this man being unfairly targeted by colleagues, as you know, as well as by Democrats? And do you think the tea party or those who ascribe to the tea party values have an out sized influence right now in the Republican party?

GINGRICH: Ted Cruz is a very aggressive articulator of a hard line position that probably 20 to 25 percent of the country (INAUDIBLE). He's in some ways much like Bora of Idaho was. He is a dramatic dissenter from the Washington establishment. That also means, by the way, because of his personality he's really infuriating defenders of the Washington establishment. I don't think Ted minds that a bit.

CROWLEY: Is that such a bad thing? I'm going to let you two answer that question in a minute. So stand by.

DUNN: Promise us.

(CROSSTALK)

CROWLEY: I do promise you. But I also want to talk about President Obama who this week in a Saturday radio address may have captured a little bit about how everyone feels just now.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I know you're frustrated by what you see in your nation's capital right now. But because it's easy to get lost in or give up on the political back and forth, I want you to remember this is not normal.

(END VIDEO CLIP)

CROWLEY: You'd be surprised what passes for normal these days. We'll be back in a minute.

(COMMERCIAL BREAK)

CROWLEY: You know things are bad when talking is a major accomplishment. Thirteen days into a partial government shutdown and five days until a possible credit crisis, the top Republican in the Senate met with the top Democrat.

(BEGIN VIDEO CLIP)

SEN. HARRY REID, MAJORITY LEADER: Senator McConnell asked me and I was happy to do that. This should be seen as something very positive. Even though we don't have anything done yet.

(END VIDEO CLIP)

CROWLEY: Mind you, these two men have offices roughly 30 steps from each other. Lawmakers outside the leadership circle are reading tea leaves and more.

(BEGIN VIDEO CLIP)

SEN. ROGER WICKER (R), MISSISSIPPI: I also noticed Senator Schumer easing around and putting his arm around Mitch McConnell. That is always an encouraging side (ph). At least there is an offer being made or some sort of proposal being (INAUDIBLE).

(END VIDEO CLIP)

CROWLEY: Is this any way to run a railroad? More with our panel next.

(COMMERCIAL BREAK)

CROWLEY: I am back with Brian Schweitzer, Anita Dunn and Newt Gingrich. We've talked about how the Republicans have taken a huge hit be it temporary or longer. Nobody is scot-free here. My question to you about the president whose popularity has also dropped is do you think that as part of his legacy, he wants to be the first president to preside over a default? Is that enough to bring him to a table?

SCHWEITZER: No, it's not. And I don't think he's going to come to the table. Look we've asked about Ted Cruz and where he's taking the party. But if you throw a skunk in the chicken coop, everybody knows you've got to get the skunk out before it kill the chickens and eats the eggs but everyone has going to get smell on. And that's what has happened here. We've got smell on the Republican Party. It's spilling over to the president and to the Democrats. And what the rest of the country is seeing is dysfunction. Look there's going to have to be some people have to rise above. There's going to be people in the middle on the Democratic side, the Republican side that breaks this loose and brokers it. Look we have got to have a speaker of the House to speak to the majority of the Senate. This is the legislative body. They ought to work this thing out and not rushing over to the president saying, solve our problem.

SCHWEITZER: He's there with the pen at the end. But the legislative branch has got to solve this.

CROWLEY: Really? I mean you don't think that that is something the president would like to avoid? I mean the president is in fact in charge.

DUNN: Well Candy, the president is in charge of the executive branch of the government. I think the constitution has been pretty clear who has the spending power here. Let me just say -- you promised me a chance to say something about Ted Cruz so I want to say that. He's an extraordinarily smart person who should not be underestimated. And to the extent he is the face of the Republican Party going into 2014, he will excite an important part of their base and he will excite an important part of the Democratic base. So I think he's a critical political figure moving forward. So we'll all keep an eye (ph) --

(CROSSTALK)

DUNN: Don't underestimate him. Let me mention something about the president which is his basic position is he is happy to talk and he is talking and he is talking and talking but he's not going to negotiate in order to get Congress to do its job, which is to behave as responsible legislators and keep this country from going into a default.

CROWLEY: But as we all know there had been negotiations before about these very same issues.

DUNN: Well I would say that but I don't think that anybody before was really willing to put this country into default. The absence of leadership that Governor Schweitzer talked about is really the danger here, and it is not on the part of the White House. It is (INAUDIBLE).

(CROSSTALK)

GINGRICH: You just heard the party line outlined eloquently. I think this president has engaged in another audacious strategy just as Obamacare was audacious. Just as running for president was audacious. Just as the way in which they did stimulus was audacious. And his strategy is to strip the House Republicans of the ability to force (INAUDIBLE) negotiate. It's a deliberate strategy. I think he is executing it very willfully. I think he has in Harry Reid somebody who is even more aggressive than he is and test of the next week is simple. Do the House Republicans stand firm and say, you have to negotiate as -- by the way, on the debt ceiling we have for 60 years since Eisenhower and we've had 18 shutdowns since 1976. None (ph) of this is new. But this president has decided that he wants to be legislator in chief and not just commander in chief. And this is a big deal historically. CROWLEY: Let me -- I want to put a quick poll up there. Is the right direction, wrong direction poll (INAUDIBLE) going into an election and ask whether the country is going in the right direction. 14 percent of Americans said it's going in the right direction. 78 percent said it's going -- it's on the wrong track.

DUNN: You want to be the 14 percent.

CROWLEY: Yes, you do. Because I think this speaks to a mistrust of the federal government. And while I understand that Republicans, you know, think that's healthy, you have to somehow believe in your government. Isn't that also one of the byproducts of this mess?

SCHWEITZER: We distrust the federal government and we ought to. Look we now have a government shutdown but we're still paying the people. That's the cost of running government. And secondly, if you really want to cut the cost of government, there are four places you get it. You got to get it from social security. You got to get it from health care, Medicare, Medicaid and you have to get it from defense. When people talk about, Oh, I'm going to shut this down or close this down (INAUDIBLE), those are rounding errors. If you want to talk about the cost of running government, talk about the real things.

CROWLEY: Thank you so much for watching STATE OF THE UNION. I'm Candy Crowley in Washington. Head to CNN.com/SOTU for analysis and extras. If you missed any part of today's show, find us on iTunes. Just search, STATE OF THE UNION. And please don't miss CNN's interview with Malala Yousafzai. Shot by the Taliban on her way home from school. "The Bravest Girl in the World," airs tonight at 7:00 p.m. eastern. Don't miss it.